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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






2. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






3. Models where firms agree to mutually improve their situation






4. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






5. The difference between total revenue and total explicit costs






6. The rational decision maker chooses an action if MB = MC






7. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






8. Product demand - productivity - prices of other resources - and complementary resources






9. Costs that change with the level of output. If output is zero - so are TVCs.






10. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






11. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






12. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






13. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






14. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






15. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






16. 0 < Ei < 1






17. Entry of new firms shifts the cost curves for all firms upward






18. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






19. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






20. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






21. Es = (%dQs) / (%dPrice)






22. AVC = TVC/Q






23. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






24. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






25. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






26. A good for which higher income decreases demand






27. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






28. Entry of new firms shifts the cost curves for all firms downward






29. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






30. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






31. Exists at the point where the quantity supplied equals the quantity demanded






32. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






33. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






34. The change in quantity demanded resulting from a change in the price of one good relative to other goods






35. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






36. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






37. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






38. When firms focus their resources on production of goods for which they have comparative advantage






39. The most desirable alternative given up as the result of a decision






40. The total quantity - or total output of a good produced at each quantity of labor employed






41. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax






42. The ability to set the price above the perfectly competitive level






43. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






44. The practice of selling essentially the same good to different groups of consumers at different prices






45. The output where ATC is minimized and economic profit is zero






46. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






47. Demand for a resource like labor is derived from the demand for the goods produced by the resource






48. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






49. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






50. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good